Interactions Between Climate Policies in the Power Sector - Green Energy and Efficiency: An Economic Perspective - page 264

Interactions Between Climate Policies
in the Power Sector

Paulina Beato and Juan Delgado

Abstract For the purpose of limiting global temperature increases, governments
have designed a broad range of policy instruments in order to reduce carbon
emissions such as carbon taxes, carbon markets and renewable energy support
policies. Although such instruments aim to serve the same purpose, they are rarely

ne-tuned to guarantee their consistency. Carbon markets are in theory the most
ef ed

under the presence of circumstances that undermine the effectiveness of carbon
markets such as market design

cient instrument to reduce emissions. The use of other instruments is justi

aws or innovation externalities. In such cases, the
optimal climate policy mix should be carefully designed to take into account the
potential interactions between policy instruments.

1 Introduction

In the context of the United Nations Framework Convention on Climate Change,
countries have agreed that greenhouse gas (GHG) emissions need to be reduced so
that global temperature increases are limited to below 2 C.

For that purpose governments all over the world have designed a broad range of
instruments in order to reduce carbon emissions and consequently limit the global
temperature increase (in addition to mitigation measures addressed to reduce the

°

*The authors thank H n for his

excellent research assistance. All remaining errors are of the authors. Paulina Beato: Independent
economic and nancial advisor. Juan Delgado: Research Associate at BC3 - Low Carbon
Programme and Director at Global Economics Group.

é ctor Otero for his comments and suggestions and Jaime Pingarr ó